Out of Nickel: Unnoticed, the raw material runs out
Out of Nickel: Unnoticed, the raw material runs out

In less than eight years, the Philippines will run out of nickel. Already in 2030, with the current Philippine production quantities and necessary increase quotas, no more nickel can be mined from currently known deposits due to the increasing demand. Deposits in Canada will run out as early as 2032. In 2034 in the United States. China’s turn comes in 2035, followed by Indonesia in 2036. And in 2039, Russia will also run out of nickel.

Nickel: Was $100,000 per tonne just the beginning?

At the latest since the price of nickel spiked to over $100,000 per tonne at the beginning of March 2022, the general public has also been made aware of the importance of this raw material. The reappraisal and the distortions caused by the manipulation of the nickel market will continue to reverberate for quite some time.

Stainless steel: indispensable raw material, not only here

Overall, the incident has highlighted that nickel is an indispensable raw material, for example in stainless steel production, which not only involves billions of US dollars, but is also an integral part of the green transformation towards a Net Zero society. In the midst of a global energy crisis, the possible loss of Russia as the most important European energy supplier and the demand to switch to renewable energy as quickly as possible, the demand for the metal is likely to continue to rise significantly.

A limited resource

But nickel is a finite resource. We have taken the trouble to correlate the available figures. The Philippines, the first producing country, will run out of the raw material as early as 2030. This is likely to put China under further pressure, as the Philippines is currently the most important nickel supplier to the Asian giant.

And even if Russia now possibly sells its production to China due to the Western sanctions, these quantities will then be lacking elsewhere on the world market – primarily in Europe and North America.

This analysis is based on the Total Nickel Demand by Sector and Scenario 2020 – 2040 of the International Energy Agency (Last updated 24 Jan 2022).

Where does all this lead?

We anticipate the result only to the extent that, based on the data currently available, the known nickel deposits will be exhausted as early as 2040. And we are already confronted with a dramatic undersupply of high-grade nickel for the green transformation in 2022. And the assumed European demand for EV batteries alone for 2030 equals the total global demand for 2021.

Where the 2 million tonnes of nickel for global stainless steel production or the demand for high-grade nickel for EVs will be sourced from the United States or China remains unanswered, even by the scientific community. Recycling alone cannot and will not do it. And the faster the transformation to a net-zero society, the faster the metal will run out.

Already a shortfall of 650,000 tonnes of nickel as of 2030

Assuming that the shortfalls caused by the failure of producing countries are not compensated for by an increase in the production volumes of other countries, a nickel demand of around 650,000 MT can no longer be met from 2030. This continues. In 2033 it will already be more than 900,000 MT, in 2035 about 3 million MT, in 2038 3.5 million MT. And in 2040, there will already be a shortage of 4.2 million tonnes of nickel per year, based on the IEA’s calculations. What was that again about the net zero society by 2050?

Can’t other producing countries step in?

Of course, producing countries like Australia or Brazil, which have large nickel reserves, can step in to fill the shortfalls of other countries. But this would deplete their own reserves much faster than currently assumed.

Ore deposits are limited

Frighteningly, nickel as a raw material is limited. Currently there are an estimated 95 million tonnes of known and mineable nickel reserves. In some cases, this includes reserves that have not even been tapped yet.

2021: Demand at 2.85 million tonnes

According to the unanimous opinion of government organisations, the International Energy Agency (IEA) and mining companies, the world will have produced about 2.75 million tonnes of nickel in 2021. The reserves and the production quantities per country, but also the demand and consumption are roughly known. According to US authorities and producer data, demand in 2021 was around 2.85 million tonnes. This already showed a shortfall in supply of about 100,000 tonnes.

If we take a simple approach and divide the known deposits by the known production volume, then all this does not look so bad at first. If the demand for nickel did not increase significantly.

2040: 6.2 million tonnes per year

However, according to the IEA, the race towards the green transformation and the net-zero society will fuel demand to over 6.2 million tonnes of nickel per year by 2040. And if you add the necessary increase rates in nickel mining, it is no wonder why the IEA forecast ends in 2040. Then there will simply be no more nickel left.

No more nickel? That can’t be true!

Some may say: “No more nickel? That can’t be true! Politics says otherwise. This first reflex is hardly surprising. We can understand that and the objection is justified. However, we do not like to make political assumptions. On closer inspection, the European Union’s green hydrogen utopia has already proved to be beautifully calculated by politicians, and no sooner had it seen the light of day than Russia had already failed as an energy supplier for these hydrogen dreams and the bubble burst.

Therefore, we did not include political wishful thinking in our calculations. Instead, we used the Sustainable Development Scenario of the IEA.

Demand jumps by almost 170% by 2040

And in our eyes, the IEA’s Sustainable Development Scenario is much more sustainable. In this scenario, demand is expected to jump by about 95% from 2020 to 2030. In 2040, the additional demand is even expected to be almost 170% higher than in 2020.

If we now look at the forecasts for the next few years, an additional demand of 8 to 12% is already predicted for 2022 alone. And a growth in mining volume of 11 to 20%. The demand for high-grade nickel for batteries alone is expected to increase by 20% in 2022. It does not occur naturally in its 99.9% form as traded on the Shanghai Future Exchange and the London Metal Exchange.

Isn’t nickel just nickel?

Most of the nickel that can be mined is found in low-grade deposits near the earth’s surface. These laterite ore deposits are rarely high-grade and only have a nickel content of 1 to 2%. So if 20 million tonnes of 1% material is mined, the end result is 200,000 MT of nickel. The production and energy costs are enormous, the damage to the environment high, and could increase further if Chinese nickel matte were to be extensively converted into high-grade nickel.

Not only is the matte conversion process economically unsustainable, it is much dirtier than the actual high-grade production.

Mineable quantity is limited

In addition, there are probably an estimated 300 million tonnes of nickel that are currently rather uneconomical and environmentally unsustainable to recycle because they have a nickel content of just 0.5% on average. Higher-grade sulphide deposits account for 40% of the known quantities. In contrast, 60% laterite deposits with a very low nickel content are by far the larger stocks.

The situation is complicated by the fact that the sulphide ores are found underground – i.e. they cannot be mined in open-cast mines.

In addition, there are still deposits in the Pacific Ocean. At 3.5 to 6 km below the surface, they are so deep down that it would be easier to shoot a man to Mars than to mine underwater.

Demand for EV batteries exceeded production in 2021

We are not the only ones to come to these conclusions. For example, scientists at Germany’s Fraunhofer Institute also forecast a significant increase in nickel demand for EV batteries. According to them, up to 2.4 million tonnes will be needed in the field of electric driving in 2040 – per year. For 2050, the German ISI scientists even see an increase in demand to up to 6 million tonnes.

The analysts at Rystad Energy also see a significantly higher demand for EV-grade nickel from 2024 than could be produced. They predict an annual deficit of 560,000 tonnes from 2026.

And the McKinsey consultants see nickel availability as one of the biggest challenges in the transition to electric driving.

However, the consultants have not yet gone that far in their considerations of consumption. If we take into account that 75% of new vehicles in the European Union are to be electric by 2030, that an EV battery weighs approx. 500 kg and that approx. 300 kg of this consists of nickel, then that is only 2.85 million tonnes per year for the EU. This clearly exceeds the assumptions of the ISI scientists.

No wonder the European Commission has challenged the Indonesian government before the WTO because of its export ban.

In this scenario, let’s just assume that China also converts 75% of its current new vehicle sales to EVs by 2030, then we will be out of nickel faster than the world can imagine.

Where does that leave stainless steel?

A fair question. Currently, global stainless steel production consumes 70% of the nickel mined. In 2021, that would be about 2 million tonnes. The IEA assumes that by 2030 only about 10% will be added to consumption in stainless steel production. By 2040, this value is even expected to increase by only 14% overall.

Are the IEA data really valid?

Overall, the IEA data in the Sustainable Development Scenario also seem embellished or simply arrogant. Whether the economic growth in Asian countries such as Indonesia, India or China has really been taken into account seems rather questionable in view of the available figures. Perhaps the criticism of the “European” International Energy Agency for not taking the development of new energies so seriously is justified after all.

What about recycling?

Recycling is an important component in the recovery of raw materials, especially nickel. Stainless steel can be recycled for the most part, which drives nickel consumption down and thus probably helps save several million tonnes per year. Another reason why the EU wants to ban its scrap metal exports. In the EV battery sector, however, the EU lacks a recycling economy.

To build this up, it would require the investment of several billion dollars, and before 2030 there will probably not even be enough old EV batteries available to be able to recycle economically. China is already much further ahead and with its demand and pioneering role in the green transformation, European battery recyclers will probably have a difficult time in the future.

Recent study: Europe urgently needs more raw materials

Can you make something like that up? No. Because scientific studies, e.g. a very recent one by the Belgian university KU Leuven, come to the conclusion that Europe alone needs to increase its annual nickel consumption by 100% in order to be able to achieve the green transformation by 2050. This would mean that instead of the current 200,000 MT per year, 400,000 MT per year would be consumed in Europe alone for the green transformation. Overall, the study assumes that Europe will need 900,000 MT per year of nickel in 2050.

This does not yet include the increases for the rest of the world.

Currently, it is assumed that the United States consumes 210,000 MT per year. The necessary increase rates there are likely to be similar to those in Europe.

Output demand forecasts invalid?

With this study, the forecasts of many nickel producers are already obsolete again. Production increases of this magnitude are almost impossible. And if only the EU and the US were to increase their nickel consumption, the Philippine mines would already be empty in 2029, i.e. one year earlier.

Does the study ignore other economies?

This does not include the economies of India or China with their combined population of more than 3 billion people. China alone currently has an annual demand of 1.31 million tonnes of nickel. If this doubles, it is calculated that the reserves of Canada, the Philippines and the United States together will be exhausted before 2030. This leads to the suspicion that other emerging economies – such as Indonesia, Brazil, Mexico and India – which are working hard to reach the economic level of the West, have been forgotten in the calculations.

World nickel reserves lower than thought?

The world’s nickel reserves may be even lower than thought. An Indonesian study from December 2021 calculates the known reserves to be even 10% lower than currently assumed by Western countries. And Indonesians are probably more familiar with nickel than Westerners.

Belgian study assumes 50% recycling rate

The Belgian study assumes that the EU will be able to cover 50% of its raw material needs from recycling in 2050. Let’s be realistic. The EU has introduced an export ban on scrap metal to keep important raw materials in the European Economic Area. At the same time, it is raising CBAM at the EU’s external borders to keep dirty imports out.

Who else is going to sell raw materials to Europe?

This raises a very realistic question: who will sell all the raw materials to the EU? If a) the raw materials are allowed in, but the higher-quality products from abroad are disadvantaged because of CBAM and b) the raw materials are then lost to the rest of the world, because the Europeans want to throw them into their recycling hoard – in order to have any at all. While c) the rest of the world runs out of raw materials.

Conclusion: The last one switches off the battery

Even in the most positive scenario, the world will run out of nickel in the near future. From a political point of view, a little later, as political figures are expected there. From the IEA’s point of view, a little earlier, since renewable energies are apparently not seen as having so much potential. From an economic point of view, even sooner, because here, too, people often work with expectations. And these expectations could come true.

If China alone needs 8 million tonnes of high-grade nickel for its EV sales in 2030, then nickel production would have to be increased to more than 12 million tonnes per year by 2030. Currently, global production is not even a quarter. And that would only be China (1.4 billion inhabitants). Without Europe (448 million inhabitants), without North America (579 billion inhabitants) and without India (1.38 billion inhabitants). And then there would be 3 years of nickel production left.

Nickel will be the new oil

Nickel is and will remain a scarce and finite raw material. We have to come to terms with that. Also with regard to lithium, cobalt or aluminium. Demand there will pick up at the same time. Stainless steel production will be confronted with a direct competitor – renewable energies. In any case, it is already foreseeable that nickel will replace oil as the fuel that moves the world “the day after tomorrow”. The nickel price spike to over $100,000 may have been speculative at first glance. At second glance, it shows a not improbable reality coming our way.

Update: Indonesia to run out of important nickel deposits by 2031

Update 16 May 2022 – Indonesian Director General of Mineral and Coal at the Ministry of Energy and Mineral Resources Ridwan Djamaluddin said in an official statement last week that the country could run out of key saprolite ores containing more than 1.7% Ni by 2031.

By 2036, the reserves could be stretched if the industry also processed ore with a Ni content of 1.5% and more. With this, the Indonesian government now also confirms that the all-important global nickel deposits, which are crucial for the green transformation, will run out before 2040.

Source (SE): Nickel short position reduced but not yet delivered?

Note on our own behalf

We are not scientists, paid lobbyists or otherwise involved in the direct trade of nickel. We are stainless steel and aluminium traders. And we have calculators, spreadsheets, and free access to the internet. And we can do a bit of maths too. Addition, subtraction, multiplication, division and percentages or rule of three is enough for us in most cases. And if we have a limited quantity X, of which a certain quantity Y is consumed per year (which also increases every year), then at some point there will be nothing left of the original quantity X. It’s simple. Very simple.

Quite simply spoken

If I have $1,000 in an account, I can withdraw $100 per year and have nothing left after 10 years. If I increase my withdrawals by 10% each year, I run out of money in my account even faster. Then already in the seventh year there is not enough money left to withdraw the full amount in the eighth year. And if the money supply is limited and cannot continue to grow because my other $3,000 are in a burglar-proof vault in the Mariannen Trench, then that just remains $1,000 in my account and at some point it will be spent, even if I get a few nickels back – if you’ll allow the pun in conclusion.

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